CBS.MarketWatch.com

The 30-year Treasury bond lost 1 16/32 pushing its yield
TYX, -0.19%
to 6.436 percent. The 10-year lost 26/32 to yield
TNX, -0.48%
6.656 percent.The 5-year was down 7/32 to yield
FVX, -0.34%
6.760 percent, while the 2-year was unchanged to yield
TNX, -0.48%
6.627 percent. In the futures pit, the March T-bond contract lost 25/32 at 92-26. Stock indices headed in opposite directions and the dollar was flat to firmer.

The new 30-years earned a high yield of 6.340% at a price of 98.771 and realized a coupon -- or interest rate -- of 6.25%.

The bid-to-cover ratio, a measure of demand that counts the number of bids compared to the actual number of yields accepted, was at a very weak 1.33. The average bid-to-cover for the 30-year had hovered just over 2.00. Demand fell to a 17-year low for new 30 years.

What's more, the amount of non-competitive bids, which gauges retail demand for the securities, was a mere $33.5 million, well short of the usual $100 million-plus that is typically seen at the auctions of 30-years.

Bill Hornbarger, fixed-income strategist at A.G. Edwards & Sons, said dealers had over estimated retail demand for long-dated issues when they went on a buying spree in recent sessions.

But he also pointed out that bond yields Thursday ended up about where they were a week ago, before the frenzied, two-sided swings of recent sessions. The yield on a 30-year bond flirted with the 6 percent threshold during one session last week, which would have brought the long bond yield almost 75 basis points off the two-and-a-half year high 6.75 percent notched Jan. 20.

The difference between the yield on the 30-year bond and 2-year note narrowed to a negative 19.4 basis points after stretching to as much as a negative 40 basis points in recent trade. The spread between the yield on the 10-year note and 30-year bond narrowed to a negative 22 basis points.

Expected shortages of bonds as the government buys back those securities with the longest maturities drove prices up. But lofty gains were undone Wednesday after remarks by Treasury Secretary Lawrence Summers were interpreted to mean debt buybacks wouldn't be limited to the long end, as the market was banking on.

Market reaction was seen overdone and bonds actually climbed in anticipation today's auction might fare better than the first two legs of the quarterly refunding, in which 5-year and 10-year bonds were sold.

The major stock indices crossed from positive to negative territory several times, as investors looked for firmer indication on the direction for long-term interest rates. Blue chip stocks assumed a weaker trade as bonds headed south, but technology shares prevailed.

Meanwhile, the Labor Department reported today that first-time filings for state unemployment insurance benefits rose by 27,000 to 301,000 in the latest reporting week.

Markets are looking ahead to monthly retail sales data, do for release Friday. Retail data offer a window on consumer demand, one of the primary drivers of the current record expansion.

The Federal Reserve has repeatedly said it is worried that demand for goods and services is far outpacing supply, a recipe for inflation. However, economists look for sales last month to have risen 0.6%, down from the torrid 1.2% sales pace of a month earlier.View and .

A stronger-than-expected rise in retail sales could spell trouble for the bond markets, given widespread expectations for the Fed to raise short-term borrowing rates by at least 25 basis points when it meets March 21.

In the futures markets, March crude rose 66 cents to $29.43 while the Bridge/CRB index , rose 2.37 to 215.06. and view latest commodity prices.

In currency markets, dollar/yen added 0.4 percent from the previous close to 109.20 while euro/dollar was unchanged to 0.98510. See international indices and view currency rates.

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